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A 5322

Imposes temporary $1 million cap on use of net operating loss deductions under corporation business tax for certain privilege periods.

2026-2027 Regular Session Introduced by Nick Scutari and 1 co-sponsor

A $1,000,000 cap on annual NOL deductions for certain CBT periods (2026–2030) limits immediate tax relief and shifts unused NOLs to later periods under revised rules.

Approved P.L.2026, c.21.
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WeVote Research Nonpartisan
Bill Summary · A 5322

Summary of A-5322 (NJ, 222nd Legislature)

Main purpose

  • Imposes a temporary $1,000,000 cap on the use of net operating loss (NOL) deductions under the New Jersey Corporation Business Tax (CBT) for certain privilege periods.
  • The cap is intended to smooth the fiscal impact of tax changes by delaying full utilization of excess NOLs, with provisions for future periods to utilize remaining NOLs under modified rules.

Key provisions and changes

  • Definition: “Net operating loss deduction” includes deductions for:

    • Net operating loss carryovers
    • Prior net operating loss conversion carryovers
    • Post-allocation net operating losses
    • NOL carryovers in a combined group
    • Any combination of the above

  • Cap on NOL deductions:

    • For privilege periods ending between July 31, 2026 and July 31, 2030, the aggregate NOL deduction claimed by a taxpayer cannot exceed $1,000,000.
    • If a privilege period has fewer than 12 months, the $1,000,000 limit is prorated by the number of months in the period.

  • Post-cap provisions (2030–2032):

    • For privilege periods ending between July 31, 2030 and July 31, 2032, a taxpayer disallowed any portion of an NOL deduction due to the cap may be allowed the remaining unused NOL deduction, but it may reduce the taxpayer’s allocated entire net income by no more than 75 percent for that privilege period.
    • Affected taxpayers can carry over the unused NOL deduction for an additional six privilege periods immediately following the original period when the NOL would have expired.

  • Certificates and other CBT provisions:

    • The cap does not affect surrender or acquisition of CBT certificates under the CBT program or the application of a CBT certificate that includes an NOL carryover.

  • Interest/penalties for underpayment:

    • No interest or penalty may be charged on underpayment of estimated tax installment payments if the underpayment results from the NOL deduction limitations, provided the installment is due after December 31, 2025 and before January 1, 2027.

  • Effective date:

    • The act takes effect immediately and applies to privilege periods ending on or after July 31, 2026.

Who is affected

  • Estimated impact on about 600 taxpayers (less than 1% of all CBT filers) and overall State General Fund revenues.
  • Taxpayers with sizable NOL carryovers who would otherwise reduce allocated entire net income substantially may see reduced immediate CBT deductions during the 2026–2030 window.
  • Small and large corporations utilizing NOLs in privilege periods within the specified window are subject to the $1 million annual cap.

Procedural and timeline notes

  • Introduced: June 23, 2026
  • Committee action: Reported out of Assembly Budget Committee with amendments (June 28, 2026)
  • Effective/applicability: Immediate effect; applies to privilege periods ending on or after July 31, 2026.
  • Budget impact: Governor’s FY 2027 recommendations align with this approach; Department of the Treasury projects approximately $485 million in additional General Fund revenues in FY 2027.

Rationale (as stated in bill notes)

  • Aims to delay but not eliminate the use of excess NOLs to reduce state tax income, thereby smoothing the fiscal impact of state and federal tax changes on state finances.
  • The phased approach provides a path for taxpayers to utilize unused NOLs in later privilege periods under revised limits.

Summary of potential impact

  • Short-term: Reduced ability to fully offset CBT income with NOLs for 2026–2029, increasing near-term state revenue.
  • Medium-term: Some unused NOLs can be carried forward beyond the initial period, subject to a 75% reduction cap on eligible net income and a six-period carry-forward extension.
  • Legislative and administrative considerations: Taxpayers and preparers will need to track NOL limitations by privilege period and manage carryforwards under the stepped caps. No penalties for underpayment related to the cap, if certain timing conditions are met.

Compiled from official sources — confirm details with the bill’s official record.

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